Carpe Diem

In Western Europe, the average jobless rate is twice as high in countries with a minimum wage vs. those with no minimum

Update: The top chart below is an updated version of the chart below, with the new chart based on unemployment rate data for September from Global Financial Data (paid subscription required).  As you can see the data in both charts are almost identical, and the individual jobless rates and the main results (medians, averages) don’t change. The bottom chart was criticized because Wikipedia was used as the data source, which I used for the original chart because it was the most convenient data source available. After receiving criticism for using Wikipedia, I spent some time retrieving data for each of the 18 countries from Global Financial Data and present that new chart below. The jobless rates in the new chart are all for September 2013, which might be more recent than some of the monthly jobless rates reported by Wikipedia. But overall, the Wikipedia data for the original chart were really pretty accurate.

New Chart (Source: Global Financial Data):

minwage1Old Chart (Source: Wikipedia):
minwageOn the Cafe Hayek blog yesterday, Don Boudreaux pointed to a post on the Money Illusion blog, where Scott Sumner presented some data on the minimum wage and jobless rates in the 18 countries in Western Europe.  Those data are summarized in the table above (data here for minimum wages and here for jobless rates) and confirm what Scott reported, which is that the average and median jobless rates for the nine Western European countries with a minimum wage are twice as high as the average and median jobless rates for the nine countries without a minimum wage.

Bottom Line: The nine countries in Western Europe with a minimum wage of $0.00 per hour, which most economists and even the New York Times argued in 1987 is the “right” wage, are apparently doing much better economically than the nine countries that have minimum wage laws legislation that makes it unlawful to employ workers whose hourly productivity is below some minimum level arbitrarily dictated by government officials.  (Thanks to Don Boudreaux for making that clarification.)

There have been various comments on minimum wage posts here and elsewhere from minimum wage proponents who argue that other countries have minimum wage laws apparently without any adverse consequences on employment levels or jobless rates. The empirical evidence from Western Europe seems to suggest otherwise. Labor markets in the group of countries with no minimum wage laws are much healthier and doing much better than the group of countries with minimum wage legislation, measured by the jobless rates in Western Europe.

As Scott Sumner asks of minimum wage supporters, “Still want to raise our minimum wage to $10?”

247 thoughts on “In Western Europe, the average jobless rate is twice as high in countries with a minimum wage vs. those with no minimum

  1. @Ron H.

    > What [...] IS the most general form of wealth?

    Money.

    >> Hence, an LVT isn’t a wealth tax.
    > What IS it then?

    From:

    “Bostonian In MO answered 9 months ago

    A tax on your net worth. The US only has one that I’m aware of, an excess retained earnings tax that can be assessed on corporations. It’s rarely assessed as it’s nearly impossible to properly define. France does have a net worth tax that ranges from 0.25% to about 1.5% based upon your net worth after a fairly generous exemption amount. Few French residents actually ever pay it.”

    Speaking in terms of continuums, rather than absolutes, a property tax would be more of a wealth tax than would an LVT. An income tax is often assumed to be a wealth tax, but that’s tricky because sometimes, temporarily, rich people have low incomes, and poor people have high incomes. Also, that would depend on how “income” is assessed. Some high-income people would owe no income tax if their income were all in the form of unrealized capital gains, and if unrealized capital gains weren’t counted as “income” — which is often the case.

    >>> [An LVT] *is* a wealth tax
    >> Please explain why cigarette taxes aren’t called “wealth taxes”.
    > Once someone *owns* gasoline, or cigarettes or sugar through an exchange, those goods are not taxed again. Land, on the other hand, is taxed at a periodic rate just because it is owned.

    One never gets back the tax payed on “one time” taxed items. Hence, an opportunity cost is payed again and again, forever. For that reason, there’s ultimately no difference between a “one time” tax and a periodic tax.

    >> Experiment can be used to determine.
    > Experiments with people’s lives. Nice one.

    Indeed. If you already know everything, there’s no need to experiment, and hence there’s no need for markets, which inherently are experiments. You can now implement absolute centralized micromanaging command-and-control and expect perfect economic efficiency.

    • [The most general form of wealth is...] “Money.

      And there we have it! You have just confessed to having no understanding of economics.

      Money is a medium of exchange. Period. Full stop.

      Money as we know it, fiat money, has NO VALUE outside of the goods and services it represents.

      Money allows exchanges to occur indirectly rather than directly. I can exchange my labor for food by accepting money that represents food from my employer, who doesn’t actually have food to give me. When I present that proxy for food to my grocer who DOES have food, he sees me presenting him with a new hat, which is what he wants in exchange for the food.

      It’s magic. I only need to close my eyes, rub a $20 bill, and speak the words “I want lunch” and lunch will appear before me. Or instead I could close my eyes, rub *the same $20 bill* and speak the words “I want to see a movie”, and I’ll be on my way to a seat in the theater. What could be more useful than that?

      My employer gave me that magic $20 bill after he closed his eyes, rubbed the bill and spoke the words “I want an hour of labor from Ron H., and it appeared for him.

      The movie theater owner may have seen me handing him a bottle of wine in exchange for a license to view a movie in his theater. The restaurant owner may have seen me exchanging a toy he wanted for his child for the lunch he gave me.

      Money is truly magical stuff, and makes the modern world possible, but no, those few electrons on a disk drive at the bank, or those little green pieces of paper have no intrinsic value, and are definitely not wealth.

      You: “Hence, an LVT isn’t a wealth tax.
      Me: “
      What IS it then?

      From:

      “Bostonian In MO answered 9 months ago… blah, blah, blah…

      No. You misunderstood. What is an LVT if it isn’t a wealth tax? If land is a form of wealth and you tax land, then what could you call an LVT if not a tax on wealth?

      Well, besides theft, of course. Don’t tell me I’m paying rent to the collective for the use of the collective’s land. I don’t buy that nonsense.

      Speaking in terms of continuums, rather than absolutes, a property tax would be more of a wealth tax than would an LVT.”

      So an LVT *is* a wealth tax, just not as much of a wealth tax as a property tax is? It’s a partial tax on wealth, or a tax on partial wealth? It’s hard to keep up with the twists and turns in your convoluted reasoning. What do you really mean? Why not figure out what you want to say before your fingers hit the keyboard, then stick with it?

      An income tax is often assumed to be a wealth tax…

      Only by economic illiterates. An income tax is usually considered to be a tax on income.

      …but that’s tricky because sometimes, temporarily, rich people have low incomes, and poor people have high incomes. Also, that would depend on how “income” is assessed. Some high-income people would owe no income tax if their income were all in the form of unrealized capital gains, and if unrealized capital gains weren’t counted as “income” — which is often the case.

      I’ll say it’s tricky! The many devious ways in which government attempts to steal our property, while calling it something else, are hard to keep up with. That’s why we hire tax accountants – to protect us as best they can from the muggers.

      One never gets back the tax payed on “one time” taxed items. Hence, an opportunity cost is payed again and again, forever.

      Sheer meaningless drivel. What does “again and again” mean”, once a minute? Once a year? Once per century?

      For that reason, there’s ultimately no difference between a “one time” tax and a periodic tax.

      The only difference I see is that you pay a one time tax…um…one time, and a periodic tax…uh…periodically, which I think means MORE than once.

      Where do you get this stuff?

      Indeed. If you already know everything, there’s no need to experiment, and hence there’s no need for markets, which inherently are experiments. You can now implement absolute centralized micromanaging command-and-control and expect perfect economic efficiency.

      LOL. Yes, and if you already know everything, there’s nothing to micromanage, so no need for government at all.

      What is the purpose of government again?

      • >>>> Experiment can be used to determine.
        >>> Experiments with people’s lives. Nice one.
        >> Indeed. If you already know everything, there’s no need to experiment, and hence there’s no need for markets, which inherently are experiments. You can now implement absolute centralized micromanaging command-and-control and expect perfect economic efficiency.
        > and if you already know everything, there’s nothing to micromanage

        That doesn’t follow.

        > so no need for government at all.

        Micromanagement isn’t the only possible role for government.

        • That doesn’t follow

          *sigh*

          Management is needed to make decisions and direct activities toward a particular end when the group being managed doesn’t have sufficient information to work on its own toward that end. If everybody already knows everything, there is no need for a manager.

          You previously wrote that with complete information there would be no need for markets or experiments. By extension there would be no role for absolute centralized command and control (government), as everyone would already be doing the most rational and efficient thing.

          If it isn’t to guide and control the actions of others, what possible role do you see for government?

          I know, it’s nearly impossible for you to imagine a world in which you are on your own, with no one else telling you what to do.

  2. @Ron H.

    >> Do propose zero income for government?
    > an LTV and income tax [...] Both are theft.

    Should governments have incomes?

    >> Off topic and equivocation. To own land in any country is also to rent it from government, since there’s no such thing as outright ownership. LVT is rent charged on “privately owned” land.
    > Is it your claim that a group of people owns all the land within an arbitrary political boundary

    Ownership is hierarchical. Some ownership is more latent. Some is more discrete.

    > and that everyone else has no ownership

    They have more discrete ownership.

    > but must rent from from these elites?

    They would be renting the latent value, not the discrete value, which they themselves would own.

    Since you’re interested in fairness and anti-welfare, here are a couple of things to consider:

    1. Since the “property owner doesn’t own all of the latent value of the property, it might be said to be unfair for him not to pay rent on it.

    2. An LVT is not just a congestion tax. It’s also a welfare deleter. The reason is that land gets its value from being surrounded by productive people (and we know this because land is more expensive in New York City than in the middle of Alaska). That’s a positive externality, which can be thought of as a form of welfare. An LVT internalizes that positive externality, and, hence, deletes that welfare. Thus, if you don’t like welfare, you should like an LVT, since it takes back a form of welfare payment people are “unfairly” receiving.

    > Don’t you think an individual can own anything

    Sure. With absolute military superiority, he can exert absolute ownership over anything he likes. Does that describe any person in the real world?

    Meanwhile, real people can own things in a relatively discrete sense, which are simultaneously owned in a more latent sense by other bodies. This relatively discrete ownership by individuals allows for economically efficient interaction with markets.

    • Should governments have incomes?

      Well, income is the wrong word, but first let’s ask “Should there be governments?”

      And if there should be governments, what should their purpose be?

      If government is a means for one person or group of people to exercise control over another group, then I’d so no, that type of government shouldn’t exist, and therefore shouldn’t receive income (or funding) from stolen goods.

      If the purpose of government is to act as an agent of the people (individuals) and perform functions they assign to it, then yes, government should have funding – or income if it’s a private business – and those who authorized that agent, and enlisted it’s services would voluntarily pay for the services they received, and there would be no need for theft.

      Me: “Is it your claim that a group of people owns all the land within an arbitrary political boundary

      You: “Ownership is hierarchical. Some ownership is more latent. Some is more discrete.

      Not exactly an answer. The “latent” owners are…who? Since “society” or “the state”, or “government”, or “the collective” have no existence or meaning outside the minds of individual people, it must be some group of people who collect rent from everyone else. And what about that border?

      You understand that you have described feudalism, right? Some one or some ones at the top own all land and resources and the serfs own the shirts on their backs, and must toil on the master’s land for subsistence, and may NOT hunt the King’s deer in the King’s forest.

      Why do you prefer that system to private, individual ownership?

      It’s really time for a lesson in original ownership and property rights. Just ask.

      They would be renting the latent value, not the discrete value, which they themselves would own.

      Yes. They can keep some of what they produce on the master’s land.

      Since you’re interested in fairness and anti-welfare, here are a couple of things to consider:

      1. Since the “property owner doesn’t own all of the latent value of the property, it might be said to be unfair for him not to pay rent on it.

      I disagree. You collectivists are fond of using land as an example of property, but that’s only one type of property. My labor is my property, yet you would say that government has a claim on some or all of it. That defines a slave. What I fashion with my labor into something useful is my property. That which I acquire in an exchange is my property. I have traded ownership rights with another party.

      I found a nice stick on the ground that was claimed by no one else, and I fashioned it into a spear. That’s *my* spear, you have no right to it, and you can’t use it without my permission. I can use it as I see fit. I can loan it or rent it to you if I chose, or I can produce meat with it and trade meat to you for something YOU have, perhaps some vegetables you have raised – which are YOUR property.

      See how easy that was? Perfectly logical, reasonable, and consistent. That same concept can be expanded to include any number of individuals interacting for mutual benefit. We like to call that a “society”.

      2. An LVT is not just a congestion tax. It’s also a welfare deleter.

      The congestion came first, before the tax. The tax is merely a device for extracting benefit from what others own.

      Government didn’t create the land, nor did government create the city in which space is valued more highly . The government merely exacts tribute from the legitimate owners, supposedly in exchange for services they may not want.

      The reason is that land gets its value from being surrounded by productive people (and we know this because land is more expensive in New York City than in the middle of Alaska).

      You have that part right, somehow. Good work. People value proximity because it provides more choices for less cost in time and travel. Competition for that desirable proximity increases the price required to outbid others.

      That’s a positive externality, which can be thought of as a form of welfare.

      It’s not an externality at all. The proximity is desirable, so the price is bid up. That’s all it is. An externality is something that’s “external” to an exchange. That’s why it’s called an externality. I can be either good or bad.

      An LVT internalizes that positive externality, and, hence, deletes that welfare.

      And why would I want to delete the welfare? If people benefit from proximity, what possible purpose could you have in diminishing that benefit?

      Thus, if you don’t like welfare, you should like an LVT, since it takes back a form of welfare payment people are “unfairly” receiving.

      LOL What utter nonsense. No one is unfairly receiving anything. Getting the benefits of proximity requires *paying* for it. the market sets the price. What could be more fair than that? You’re trying to add to the already high price for some inexplicable reason.

      And, I LIKE welfare. Welfare is GOOD. Redistribution of resources from producers to non-producers, commonly erroneously called welfare, is BAD.

      Me: “Don’t you think an individual can own anything?

      You: “Sure. With absolute military superiority…

      I meant, does an individual have a *right* to own anything or does it all belong to the Master(s)?

      Meanwhile, real people can own things in a relatively discrete sense, which are simultaneously owned in a more latent sense by other bodies. This relatively discrete ownership by individuals allows for economically efficient interaction with markets.

      Complete nonsense. Interactions ARE markets. they don’t interact WITH markets. Without clear property rights, commerce and markets can’t exist.

      And “simultaneous ownership”? You must be kidding. Common ownership is a valid concept, simultaneous ownership isn’t.

        • How would you fund it?

          An agency, created or contracted by a group of individuals to provide a particular service or package of services would be funded by those individuals who requested the services.

          Voluntary organizations, mutual aid societies, mutual insurance companies, private businesses. There is no service currently supplied by government, that people actually want, that couldn’t be provided more efficiently and at lower cost by private businesses and organizations.

          • >>> government should have funding
            >> How would you fund it?
            > [it] would be funded

            How would it be funded?

          • How would it be funded?

            I explained it pretty clearly, but apparently not clearly enough.

            If by “it” you mean government, meaning an agent of the people, then “it” would be funded by the users of the service in the form of fee-for-service, or by subscription, or by premium, just like every other service is currently provided.

            Perhaps “government” is an inaccurate term, as it implies governance. People don’t need to be governed, they need services.

            When I need a haircut I seek out someone who provides that service and pay them a fee to perform that service.

            If I need periodic trash pickup at my residence, I contract with a company that provides that service and agree to a monthly fee for that service. a subscription, so to speak.

            I can join any number of organizations that provide benefit to members with mutual interests.

            If I want to protect myself against financial loss from fire I can buy homeowner’s insurance for that purpose. My insurer in turn might pay a fire loss limiting company (fire department) to rush out to put out a fire at my house to limit damage, and resultant financial loss, because that’s in their interest.

            Actually fire departments are a perfect example of a service that could just as easily be provided by private companies instead of government.

            Private security now protects many businesses and private communities. There’s no reason all police services couldn’t be provided by competitive private businesses.

            As I wrote, there isn’t a single service provided by government at every level that couldn’t be provided more efficiently and cheaply by private organizations.

            I now expect barrage of lame and tired collectivist objections.

  3. WRONG, We have a minimun wage in Swiss, 2800 Franc Suisse, or in euro : 2060€ , !!!!!!!!! and in germany too, 8,50€!!!!!!!

    • You do realize this article was written before Germany implemented its minimum wage law? Switzerland doesn’t have a law on it either, it relies on collective bargaining between employers and employees.

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